The Means Test

Under the old bankruptcy rules, most filers were free to choose the type of bankruptcy that seemed best for them—and most chose Chapter 7 rather than Chapter 13. The bankruptcy laws were changed in 2005, taking this choice away from some filers with higher income.

The bankruptcy "means test" determines whether you are eligible to file a Chapter 7 bankruptcy. It's a formula designed to keep filers with higher incomes from filing for Chapter 7 bankruptcy. High income filers who fail the means test may use Chapter 13 bankruptcy to repay a portion of their debts, but may not use Chapter 7 bankruptcy to wipe out their debts altogether.

The test compares your recent income history to that of other North Carolinians. If it is determined to be "too high", then your income is compared to expenses. For some categories of expenses, the test looks to what you actually spend, while in other categories it looks to expense amounts that are thought to be reasonable by the Internal Revenue Service. Most lawyers agree that the test is convoluted and based not entirely on reality.

A person's odds of successfully navigating the means test are greatly increased if they are represented by an attorney experienced in making the test work for a variety of different financial circumstances.

For answers to other questions you may have, feel free to visit the other pages listed under the "About bankruptcy" link. It's found at the top of every page on our site.